Core Values and Intercultural Management

Core Values and Intercultural Management

Case Study:
Nestlé

In 2001, Nestlé was the largest and most diversified food
company in the world, with nearly 500 factories in more than 100 countries. In
fact, over the period 1867–2000 it surpassed other food manufacturers and
purchasers of agricultural raw materials in scale of operations. Over 230,000
people worldwide work in Nestlé's factories, research laboratories and offices.
In 1999 Nestlé generated a total income of 4,007 million Swiss francs.

This case study is based on a series of interviews with prominent
Nestlé managers engaged in strengthening Nestlé's core values. Niels
Christiansen, Vice President, Public Affairs of Nestlé SA, explains that even
though 98 per cent of Nestlé operations are outside Switzerland, the company
still originated in Switzerland. The corporate headquarters is located in
Switzerland. Hence some Swiss cultural values are an integral part of Nestlé
core values. Many Swiss values are embedded in the Nestlé General Management and
Leadership Principles and the Nestlé Corporate Business Principles. These
Principles reflect not only Nestlé's basic corporate values, but some of the
'Swissness' of the company as well. What has been described as the Swissness of
the company refers to the pragmatic and resultsoriented nature of the
Principles. The Nestlé General Management and Leadership Principles are
presented in our case study on communications and intercultural management (see
Chapter 2). The
box on page 87 reproduces the Nestlé Corporate Business Principles.

NESTLÉ CORPORATE BUSINESS PRINCIPLES

Nestlé is committed to the following business principles in
all countries taking into account local legislation, culture and religious
practice:

Nestlé's business objective, and that of management and
employees at all levels, is to manufacture and market the company's products in
such a way as to create value that can be sustained over the long term for
customers, shareholders, employees, business partners and the large number of
national economies in which Nestlé operates.

Nestlé does not favour short-term profit at the expense of
successful long-term business development, but recognizes the need to generate
profit each year in order to maintain the support of the financial markets, and
to finance investments.

Nestlé believes that, as a general rule, legislation is the
most effective safeguard of ethical conduct, although in certain areas,
additional guidance to management and employees, in the form of voluntary
business principles, is beneficial in order to ensure that the highest standards
are met throughout the organization.

Nestlé is conscious of the fact that the success of a
corporation is a reflection of the professionalism, conduct and ethical values
of its management and employees, therefore recruitment of the right people and
ongoing training and development are crucial.

Nestlé recognizes that consumers have a legitimate interest
in the company behind the Nestlé brands, and the way in which the Nestlé company
operates.

Although core values can be propagated across a multicultural
corporation in a variety of ways, Nestlé adopts certain approaches that are
characteristic of it. These approaches have been used consistently and for a
considerable length of time, even though the company's various Principles have
been written down only recently. One important approach is careful and
meticulous selection of personnel. This approach has been enshrined in the
Nestlé Corporate Business Principles. Potential employees are assessed as to
whether they possess the attributes that would enable them to fit into the
Nestlé way of life. An assessment is also made of whether they can achieve complete integration into Nestlé culture over
time. Nestlé's selection process has been so effective that most of its
employees have pursued a lifetime career, spanning at least 30 years with the
company. This lifetime association with Nestlé enables employees to completely
imbibe and operationalize the Nestlé core values. Additionally, new recruits are
given extensive coaching as well as training, to ensure that they fully
understand Nestlé's core values. Both the Nestlé Management and Leadership
Principles document and the Nestlé Corporate Business Principles document
contain personal messages from the CEO. The CEO, as well as all senior managers,
make it clear that they expect all employees to subscribe to and implement the
company core values. Of course, members of the top management echelon also live
the core values themselves so that they serve as role models.

Nestlé uses extensively another means to propagate its core
values: its international management cadre. Members of this cadre go from
country to country working as managers in different Nestlé branches. These
international management cadre managers ensure that the Nestlé core values are
institutionalized at all Nestlé locations. They occupy a significant proportion
of the key positions at all Nestlé branches, and can therefore exert a
tremendous amount of influence. All managers of Nestlé, irrespective of ethnic
origin or geographic location, are part of the Nestlé culture and share the same
core values. Additionally, by rotation, they spend some time at the Nestlé
headquarters in Vevey, Switzerland. During the initial stages of their career,
Nestlé employees (from all over the world) attend residential training
programmes at Vevey, which are of approximately one month's duration. These
programmes reinforce the core values which Nestlé employees have already
assimilated. They also make Nestlé employees realize that regardless of where
they are from, they all share these core values.

Although Nestlé's core values are the glue that holds together all
its managers distributed across more than 100 countries, the company is also
sensitive to local cultures. Brabeck, CEO of Nestlé, has remarked, 'Since
Nestlé's activities in Switzerland, its country of origin, account for less than
2 per cent of its global turnover, Nestlé learned very early to respect the
social, political and cultural traditions of all countries in which the products
are produced and sold, and to be a highly decentralized people and products
oriented company rather than a systems oriented company.' The interesting
question that presents itself is, how does Nestlé manage the dialectic between having well-entrenched core values, and
respecting national cultures?

Vietnam is a country in which Nestlé has established a branch only
recently (in 1996). It is a challenging country in which to start operations. In
the first instance, it is a communist country with a state controlled market.
Additionally, the cultural ethos and ambience of Vietnam are quite unique. When
Nestlé started its branch in Vietnam, it had to embed and institutionalize its
core values there from scratch.

Nestlé's initial step was to translate the two documents, Nestlé
Management and Leadership Principles, and Nestlé Corporate Business Principles,
into Vietnamese. During translation, it was found that some concepts could not
be translated literally. Literal translations would lead to some loss of
intended meaning. Hence, some of the concepts were elucidated using Vietnamese
metaphors and symbols. For example, recourse was made to the metaphor of the
family. The sort of relationship that Nestlé expects from employees was compared
to the sort of relationship that exists between family members. The importance
of teamwork and team spirit was likewise advocated by reference to family
values. Thus, a document was created especially for Nestlé Vietnam that
encapsulated the Nestlé core values in the local idiom. This document is given
to every employee who joins the branch.

Before employees can join Nestlé Vietnam, they have to satisfy the
recruitment criteria. This includes whether the prospective employees can
understand and appreciate the core values of Nestlé, and align themselves with
these core values. Individuals who will be unable to operationalize Nestlé core
values, because of either their background or their personality, are screened
out. The background of a prospective employee is thoroughly checked. This is to
ascertain what kinds of influence have conditioned him or her. At Nestlé
branches that have been in existence for some time, considerable autonomy is
given to line managers in the matter of recruitment. In start-up branches like
Nestlé Vietnam, however, the HR department and top management are very closely
involved in the recruitment process. They admit into their fold only those
individuals who can subscribe to Nestlé core values. Nestlé believes that if
employees are deficient in technical skills, but have the appropriate attitudes
and values, they can be trained and learn those skills. On the other hand,
values are more difficult to change. If prospective employees have attitudes
incompatible with Nestlé's core values, then no amount of coaching can successfully bring them in line with Nestlé's
expectations.

One of the core values of Nestlé is that its employees should have
intercultural competencies and be able to interact effectively with people from
all over the world. Hence, as part of the recruitment process at Nestlé Vietnam,
prospective employees' attitudes to foreigners are assessed. Also assessed is
how they view people from other parts of Vietnam. Preference is given to
prospective employees who are tolerant and liberal thinking, and have experience
of associating with people from diverse backgrounds.

Sometimes it transpires that prospective employees would not like
to work with foreigners from other parts of Asia, such as Malaysians, Japanese
or Taiwanese. They do not mind working with Europeans, however. In such cases,
Nestlé Vietnam tries to ascertain whether the prejudice emanates from ignorance
or from a deep-rooted emotion. If it is the former, training and coaching can
eradicate the prejudice, as can first-hand experience of working with Malaysian,
Japanese or Taiwanese managers. This is particularly true of young recruits who
are perceived as being malleable. They are very receptive to being guided by a
coach or mentor, much more so than in the case of their European counterparts.
Thien Luong Van My, currently Issues Manager - Public Affairs at Nestlé
headquarters in Vevey, Switzerland, and Country Head of Nestlé Vietnam for the
period 1996–2000, comments:

They really enjoy this coaching like from an elder brother
to a younger brother or sister. They really like to be guided not only about how
they should work, but about how they should behave as well. And we pay a lot of
importance to our newly joined recruits' patterns of interaction. We observe
them closely. And the elder brother recommends to his younger sibling how he can
improve himself. This system appears to be working for us. We started in 1996
with three employees. I had a driver and a secretary. Today, there are 300
employees with Nestlé Vietnam, all of whom are committed to Nestlé's core
values.

The core value of team spirit had to be nurtured with special
effort at Nestlé Vietnam in its early years. It is the experience of Nestlé
Vietnam that the Vietnamese are a fairly individualistic people. They may be
loyal to a small group of people who are usually family members. Nestlé Vietnam
was in its crucial initial six years when headed by Thien, who is Vietnamese and
grew up there. He therefore positioned himself as the patriarch of the company,
somebody who could be considered an uncle or
elder brother. He then capitalized on his position to encourage team spirit. He
also ensured that team spirit was propagated in a manner appropriate to the
Vietnamese culture. For instance, a practice integral to Vietnamese culture is
showing respect and deference to elders. At Nestlé Vietnam, a few units are
headed by individuals who are younger than a few of their subordinates. A
careful watch is kept on these individuals, to ascertain whether they treat
those subordinates who are older than them with respect and regard.

Nestlé Vietnam has tried to design approaches for
institutionalizing the Principles that comprise the Nestlé core values. For
example, consider the Nestlé Corporate Business Principle regarding protection
of the environment:

Nestlé integrates environmental policies, programs, and
practices into each business as an element of management in all its
functions,

develops, designs and operates facilities and conducts its
activities taking into consideration the efficient use of energy and materials,
the sustainable use of renewable resources, the minimization of adverse
environmental impact and waste generation, and the safe and responsible disposal
of residual wastes,

applies Nestlé internal standards suitable to local
conditions in those regions where specific environmental legislation is not yet
in place,

improves environmental protection relevant to its activities
on a continuous basis,

provides appropriate information, communication and training
to build internal and external understanding about its environmental commitment
and action.

Nestlé Vietnam has had to work very hard to inculcate the value of
conducting business in an environmentally sound manner amongst its employees.
Many of the non-management staff come from rustic backgrounds with no higher
education. Hence, courses are organized regularly so that these staff members
can be educated on how to conduct themselves in an environmentally friendly
fashion. When any staff members deviate from the Nestlé standards for hygiene
and environmental protection, their lapse is pointed out to them. Newly joined
staff members have to be told that trash should not be littered anywhere, but
should be put into garbage bins.

On one occasion, a newly joined member of the cleaning staff was
asked to clean the warehouse adjacent to a Nestlé factory. He was asked to do
this on a Sunday when there were no senior managers at the factory site. While
cleaning, he threw some discarded paints and oil into the drainage system. It
was entirely a spontaneous act. Fortunately, a manager came to know about this
occurrence the following day, and the drainage system was stopped before it
discharged its contents into a river flowing nearby. If the paints and oil had
found their way into the river, a major catastrophe would have resulted. After
this incident, Nestlé Vietnam provided even more stringent instructions about
hygiene and environment protection to its entire staff.

Another core value that had to be addressed explicitly by Nestlé
Vietnam was one termed 'Conflict of Interest' in the Nestlé Corporate Business
Principles document. This core value stated that Nestlé requires its management
and employees to avoid personal activities and financial interests that could
conflict, or appear to conflict, with their jobs. In Vietnam, it is customary
for people to hold more than one job. They might work for half a day at a
primary job, and then be employed elsewhere, in a job that is in some way
competitive with the primary job. Nestlé Vietnam has had to adopt a firm stance
here.

Thien and the other expatriate Nestlé employees who set up Nestlé
Vietnam were succeeded by Vietnamese managers in early 2001. This has
contributed to institutionalizing the Nestlé core values at the branch. It also
signifies that the branch has assimilated the Nestlé core values. In fact, the
job success of Thien and his expatriate colleagues is being evaluated in terms
of the performance of their successors.

Inferences

Fostering of uniform core values in a global corporation
is a key to successful intercultural management

The challenge of intercultural management for organizations
lies in the appropriate juxtaposition of corporate culture and ethnic cultures.
This is the challenge that Nestlé, with its many, many branches located all
around the globe, had to grapple with constantly. Ultimately, however, corporate
culture transcends ethnic culture. In other words, corporate culture, which is
governed by the organization's core values, is superordinate to other cultures
such as ethnic culture. This has been the
mode of functioning of all the organizations profiled in this book: Nestlé,
Credit Suisse, BMW, International Committee of the Red Cross, IBM, ICAS and so
on. These companies have not specifically articulated that this is their mode of
functioning. It may not even be recognized as a conscious strategy by the top
management echelons. Certainly, the key players in the individual companies are
not aware that this is a mode of functioning shared by high-performance
transnational organizations. Nonetheless, we record in this book that this is
the case.

The core values of an organization determine the nature of its
corporate culture. The corporate culture can influence the mind-sets of its
employees, which in turn will have been shaped by a wide variety of factors. For
individual employees, one of these factors is definitely their ethnic culture.
When an organization has branches in different locations and cultures, it is
inevitable that those branches are affected by local cultures in more ways than
one. In the first instance, the products and services offered by the
organization must find a resonance in the local culture. Otherwise there would
be no market for those products and services. Thus, Nestlé offers many food
products that are culture-specific in that they reflect the food preferences of
the local consumers. One of Nestlé's food products is Maggi instant noodles.
These noodles are available in a wide variety of cultures, and offer a feature
that is appreciated in all these cultures - they can be prepared in a matter of
minutes. However, the noodles are concocted differently in different cultures.
In Switzerland, for instance, the noodles are sold with a cheese garnish. In
India, Maggi masala noodles are a runaway success. Maggi masala noodles have a
pungent, spicy flavour, which might not find favour in Switzerland. Likewise,
Maggi noodles as sold in Switzerland would be too bland for the average
Indian.

Local cultures can impact on organizations in more complex ways,
however. They can influence (though not determine) corporate culture. This
happens when a significant number of employees of an organization hail from a
specific ethnic culture. The corporate culture of Nestlé has a certain
'Swissness' about it, as observed by Hans Jöhr, Assistant Vice-President at
Nestlé headquarters. This is to be expected, since Nestlé originated in
Switzerland, and is headquartered in that country. However, the fact that
Vietnamese personnel staff Nestlé Vietnam signifies that elements of Vietnamese
culture that are venerable are incorporated into Nestlé Vietnam. This enables
the Vietnamese workforce to be productive and happy. For instance, the notion of projecting the CEO of Nestlé
Vietnam as a father figure, who can then engage in team building by encouraging
employees to think of each other as siblings, was an approach that reflected
Vietnamese culture. This is a case where the dialectic between corporate culture
and ethnic culture has been managed successfully. This in fact is an objective
of intercultural management: to harmonize the juxtaposition of corporate
cultures and ethnic cultures.

However, there may be individual employees whose cultural
backgrounds give rise to values that conflict with the core values of an
organization. The resulting dissonance can be resolved satisfactorily by the
employees either leaving the organization, or modifying their values. In other
words, the core values of an organization are superordinate. The International
Committee of the Red Cross faces the dilemma of dealing continuously with
conflicts between corporate culture and ethnic culture. For example, in
Afghanistan they are determined not to uphold conventional local attitudes to
the treatment of women. If this entails having to enact a more diminished role
in Afghanistan, then so be it.

The dialectic between corporate culture and ethnic culture has
been described by Nestlé as follows: 'The Company's business practices are
designed to promote a sense of identification among all employees all over the
world, and apply a number of common rules, while at the same time adapting the
expression of these rules to local customs and traditions' (Nestlé Corporate
Business Principles). This of course is easier said than done. However, it must
be emphasized that high-performance companies have strong cultures with
well-defined core values. These core values are capable of adaptation to local
customs, traditions and cultures. They cannot be supplanted by the values of
other cultures.

CASE DISCUSSION QUESTIONS

Why is Nestlé successful in inculcating its core values in
its branches around the world?

What is the dialectic between corporate core values and
ethnic culture? How does this impact on the performance of cross-cultural
managers?

What would be the differences in the dissemination process
of Nestlé core values in Vietnam and in Germany?

Do core values play a special role for a transnational
corporation?

Should Nestlé rest content with its core values? What likely
modifications could Nestlé make in the next decade?

Why is it not incongruous for a transnational corporation
like Nestlé to have some core values that originate in
Switzerland?